OYO Raises $50M from InCred After 76% Valuation Drop

OYO, the online hotel aggregator, has successfully secured an investment of ₹417 crore ($50 million) from InCred Wealth and Investment.

Entrackr states this new investment values OYO at ₹19,756 crore ($2.38 billion). This is a significant 76% decrease from its peak valuation of nearly $10 billion. The sharp decline in valuation highlights the substantial challenges that the travel tech platform has faced in recent years.

Overview of Funding Round

The recent investment by InCred Wealth and Investment represents OYO's first major funding in almost three years. Oyo will issue 14.37 crore Series G CCPS at an issue price of ₹29 each to raise the fund’s amount raising Rs 416.85 crore ($50 million).

According to the regulatory filing from the Registrar of Companies (RoC), the latest investment gives InCred a 2.11% stake in OYO post-allotment.

What Is CCPS?

CCPS are compulsorily convertible preference shares. Unlike regular preference shares, which may or may not be converted into equity, CCPS offers investors a guaranteed conversion to equity, often at a predetermined conversion rate.

Expanding Global Footprint and Profitability

The Gurugram-based travel tech giant is expected to use the funds for growth and global expansion, including acquisitions, and to enhance its business plans.

Oyo is Expanding Globally

The company recently announced the opening of its first luxury hotel in Dubai, the Palette Royal Reflections Hotel and Spa. This is part of its efforts to enhance its premium property offerings worldwide.

The organization anticipates a significant increase in Indian tourists in 2024. This is due to Dubai's recent relaxation of its visa policy for Indian travelers.

Profitability

• In FY24, OYO's adjusted EBITDA surged to Rs 888 crore ($107 million), a significant rise from Rs 274 crore ($33 million) in FY23.
• OYO achieved profitability for the first time in a financial year, with a profit-after-tax (PAT) of Rs 99.6 crore ($12 million) in 2023-24.
• The company expanded its portfolio by adding approximately 5,000 hotels and 6,000 homes worldwide and saw its gross margins increase to Rs 2,508 crore ($302 million) from Rs 2,350 crore ($283 million) in FY23.
• Operating costs were also reduced, falling from 19% of GBV in FY23 to 14% of GBV in FY24.

Microsoft's investment in OYO

In August 2021, Microsoft invested $5 million in OYO at a valuation of somewhere around $9.6 billion.

Previously, SoftBank Group Corp, a major investor in OYO, had marked down the company's valuation to $2.7 billion. However, OYO rejected this assessment, stating that the markdown was patently incorrect.

OYO’s IPO Plans

Ritesh Agarwal, the founder of OYO, recently announced that the company has achieved its eighth consecutive quarter of positive EBITDA.

Despite these positive developments, OYO has withdrawn its IPO application twice due to unfavorable market conditions. It plans to refile its draft prospectus reportedly after the completion of the refinancing of the $450 million loan, which is expected by the next quarter.

The report indicates that the start-up is in advanced discussions to raise Rs 1,000 crore (approximately $120 million) from family offices and wealthy individuals. This fundraising is part of a larger investment round that will precede refiling its draft prospectus for an IPO.

Oyo’s Future

OYO is spread across 80 countries with 1 million rooms, and this new hotel is an addition to the list but can contribute more than a few rooms combined. The growth line of OYO is rising each year and is driving many to invest in it. TheOYO share price is currentlytrading at ₹45.

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